Tapping into our oceans’ economic potential

The economic potential of our oceans and coastlines is said to be huge

As high-pitch shrieks of airborne seagulls fill the evening sky, dozens of fairy light adorned yachts, dinghies, and dragon boats make their way to and through the Alfred and Victoria Basins of the V&A Waterfront. Cheers from onshore crowds erupt as the luminous nautical merry-go-round passes by.

Then Beatenberg makes itself heard, kicking off the inaugural South African Ocean Festival with an al fresco concert from the deck of an I&J fishing vessel. Featuring a full week of yachting, stand-up paddling competitions, dragon boat racing, demonstrations by the National Sea Rescue Institute (NSRI), and other ocean-based activities, the event—a shared concept by the Waterfront, the South African Maritime and Safety Agency (SAMSA), and Worldsport—has one objective: boosting local and international interest in South Africa’s water sports and leisure sector.

The festival’s kick-off more or less coincided with the launch of South Africa’s first National Marine Tourism and Leisure Strategy, which aims to further develop, promote and grow our country’s ocean-based tourism sector. This also happens to be a priority of Operation Phakisa, an initiative that aims to unlock the economic potential of our oceans. This national, far-reaching project aims to fast-track economic growth and development, and will be overseen by the Minister in the Presidency, Jeff Radebe.

Offshore oil and gas exploration

Tourism plays a key role in Phakisa, says SAMSA CEO Tsietsi Mokhele during the Ocean Festival’s opening night. In his speech, he placed a strong emphasis on boating. “Our strategic vision is to ensure that by 2030, South Africa will be a premier, experience-based marine tourism destination in Africa and globally,” he explains.

“We are looking at the potential of the boating industry, and how we can become a major manufacturer and exporter of boats and related products. We also want to contribute to creating a lifestyle which enables South Africans to become consumers of locally made and developed boating products.”

A second focal point of Operation Phakisa, besides growing our water-based tourism sector, is oil and gas. “Sitting off our country’s coastline is 9-billion barrels of oil. This is the equivalent of 40 years of our oil consumption,” Radebe said last year, when Phakisa was launched. He added that South Africa’s offshore gas reserves were estimated at 60-trillion cubic feet–enough to meet our country’s gas demands for the next 375 years.

Tapping into these deposits can change South Africa’s economy once and for all, Mokhele says: “There is proof that we could drill 30 offshore wells over the next 10 years. Those who are in the oil exploration business have committed investment and resources to realise this.”

Regional oil rig repair hub

The SAMSA CEO adds that South Africa’s offshore oil and gas potential goes beyond the drilling of wells and exploiting the above-mentioned deposits. “Every year, 170 oil rigs pass our coastline, en route to be repaired elsewhere,” he explains. “The largest number of rigs we as a country have serviced in one year, was four. Repairing one rig contributes R400-million to the local economy. That means that at best, rig repairs have earned us R1.6-billion in one year. We can do much better.”

That is why Transnet has committed to invest R9.8-billion in a new oil rig repair and services centre in Saldanha, Mokhele says.

Announced in January this year, these plans comprise the construction of a deep-sea oil rig repair quay and an offshore hub for the supply of food, equipment and materials, as well as the expansion of a jetty to accommodate floating docks for the purpose of building and repairing ships. The target is to service 20 rigs per year to begin with, which could create up to 25 000 jobs.

Whilst Gabby Sequeira doesn’t dispute the scope and importance of South Africa’s offshore oil and gas reserves, nor the potential of a local repairs sector, the CEO of petrochemical investment firm Calulo says the timing might not be ideal.

“The problem is the oil price. Because it has dropped so much over the last year, many companies have cut down on their oil and gas exploration activities along our coast,” he explains. “This doesn’t mean we should not invest. Cycles always turn and, when they do, South Africa has to be able to play along.”

Global competitiveness is key

The issue of competitiveness, from a maritime point of view, is also a concern, Sequeira says. His statement resonates in the 2014 Global Pricing Comparator Study (GPCS) of the Ports Regulator of South Africa. This document shows that total port costs in the Rainbow Nation, including terminal handling charges for container owners, are 190% higher than the global average.

In order to compete with, for instance Singapore, globally an important rig repair hub, the South African authorities have to think carefully about Saldanha’s future tariffs, Sequeira says: “If companies can get their oil rigs repaired and maintained for much cheaper in Singapore, they will continue to go to Singapore, even if it is further afield. Therefore, instead of covering the costs of the Saldanha expansion by increasing the tariffs, one should rather lower them to attract more ships.”

He adds that growing South Africa’s ocean economy should, ideally, go hand-in-hand with developing the entire shipping sector, not just oil and gas. Sequeira explains that whilst South Africa’s economy is largely driven by the export of goods, products, and commodities, of which over 90% is shipped by sea, the country is not very much involved in the physical shipping of whatever it sells to customers abroad. This is a missed opportunity.

“As a shipowner, you can register your vessel anywhere in the world. One tends to choose a location, or jurisdiction, based on tax regulations and other laws that enable you to maximise your profits,” Sequeira explains. “That is why you see so much activity in Singapore, China, and the Philippines, and not in South Africa. We are lagging behind on that front, despite our sophisticated port and services infrastructure. We need an integrated maritime business culture and environment.”

The promise of aquaculture?

A third priority of Operation Phakisa, besides boosting water-based tourism and the oil and gas sector, is growing South Africa’s aquaculture sector. While the farming of fish, sea creatures like oysters, mussels, and algae for human consumption contributes to almost half of the global fish supply, it accounts for just 1% of the South African production.

“Fish is a non-renewable resource. You can’t multiply the fish in the sea according to your needs,” Mokhele says, referring to the problem of overfishing, which has led to the depletion of countless fish stocks.

According to the State of World Fisheries and Aquaculture report by the Food and Agricultural Organisation, which was last published in 2011, 52% of fish stocks are fully exploited, 20% are moderately exploited, 17% are over-exploited, and 7% are depleted.

Fish farming has been hailed as a solution to combat the issue. “We can use the technology that is available and build a fisheries sector based on aquaculture,” Mokhele says.

He explained that, from an aquaculture point of view, Operation Phakisa wants to contribute to economic development whilst uplifting communities through fish-farming enterprise development. According to him, fish farming can kill all those birds with one stone. “It can be rolled out anywhere and practiced by people of all skill levels. The technologies are there, and the money to invest in aquaculture is there.”

Lack of community participation

Associate Professor at the Institute for Poverty, Land and Agrarian Studies (PLAAS) Moenieba Isaacs doesn’t agree with Mokhele’s statements regarding aquaculture. She argues that the farming of fish and marine organisms is not easy to roll out and to sustain, particularly in the context of community-based aquaculture projects. “It is not easy to practice. It is a very technical field. Mussels and oysters, which are both popular aquaculture species, need to be tested regularly for certain bacteria. This can cost up to R60 000 per test,” she says. “Which community has that kind of money?”

She adds that she doesn’t believe that the aquaculture component of Operation Phakisa will help uplift poor communities, particularly small-scale fishers. First of all, they were not involved in the drafting and implementation process of the initiative. “Fishing communities and small-scale fishers were not involved at all, not from a SAMSA perspective nor from an aquaculture perspective,” she says. “Big business was invited to participate, as well as scientists, and of course government stakeholders. Operation Phakisa mainly caters for corporates. (It does not aim to) uplift small communities.”

That the main focus seems to be abalone, trout, and salmon proves this, Isaacs says: “These are high-value species meant for the high-end market, not to solve or improve our local food security levels.”

A fourth pillar of Operation Phakisa regarding the Ocean Economy is what is called the Marine Protection Services and Governance component. During the Ocean Festival’s launch, Mokhele stressed the importance of conserving, preserving and protecting our water resources.

“When making a living out of a natural endowment, one should also protect it so that we can pass it on to the next generation,” he says. “Ocean governance and protection services are important. We need to have a balance between commercial exploitation and making sure our oceans remain healthy. The world in which we are living is, after all, on loan to us."